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How does a previous repossession affect your chances of a car loan?

How does a previous repossession affect your chances of a car loan?

We were asked an interesting question in a Car Nation Canada dealership last week. One I don’t think I have covered in the blog before. We were asked ‘How does a previous repossession affect your chances of a car loan?’

The person asking the question had their car repossessed a couple of years back and had not sought credit since. Now they had to buy a new car and they needed to know where they stood. As this is something many will have to tackle, I thought it a good subject to cover in a post.


A lender will repossess a car if the borrower defaults on the loan. It’s usually a move of last resort but is one of the many tools lenders have to ensure they get their money back. It isn’t a pleasant experience and it isn’t something people do willingly but it is unfortunately something people have gone through.

When you take out a car loan, the lender owns the car until you pay off the loan. Once paid, the lender will give you the title to the car so you own it free and clear. Until that time, the lender owns the car, not you. You just have the right to use it while you’re paying for it.

Car loans after repossession

As you can imagine, having a repossession on your credit report can make accessing further finance difficult. Your score takes a hit and the repossession is recorded on your history for every lender to see.

This doesn’t make it impossible to access credit. It just makes it more difficult. Many mainstream lenders won’t deal with people with people who have previously defaulted. Others are more understanding.  Given the situation we are going through right now, there is more leeway than usual for borrowers to need credit.

You will pay for the privilege though.

A car loan will be more expensive to acquire and have a higher interest rate. This is because you will be perceived as a higher risk.

Cheaper car loans after repossession

There are a couple of things you can do to help your situation if you have a repossession on your credit report.

Create a history of regular on-time payments – Make sure all your other outgoings are paid on time. Spend 6-12 months paying everyone on time and you will begin to demonstrate that you’re not a high risk.

Consider a co-signer – A co-signer with a good credit score can help mitigate your perceived risk by guaranteeing the loan. This will often open the door to more lenders at lower rates.

Be patient – A repossession can stay on your credit report for up to 7 years. The longer the period between the repossession and your loan application the better. The more payments you have made on time since then the lower risk you will appear.

It is not impossible to get a car loan if you have a repossession on your credit report. It may be difficult and it may be initially expensive but it is possible. If you need help accessing a car loan, contact your nearest Car Nation Canada dealership.


For more information please visit https://www.dixieautoloans.com/

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